American Home Mortgage (AHM) said that the liquidity crunch it is experiencing has made it so that it can no longer fund home loans, and it may have to liquidate assets. That is basically like saying that it doesn't know how much longer it can stay in business.
Take a look at that chart above. The stock was halted on Friday, and when it opened on Tuesday, it was soon trading below $1. That's right, $1. The stock was above $20 a month ago.
This is an example of the extreme stupidity that these lenders went to in order to fund any and every loan they could during the real estate boom. But no party ends without a hangover. Unfortunately, the debacle is weighing on the entire financial sector, which in turn is dragging the whole market lower.
The financial crisis that is hitting the mortgage market has to be first and foremost on the Fed's radar. I'm not sure how long they can sit by and watch companies go under without throwing the industry a lifeline in the form of a rate cut.
And it doesn't help that oil prices also hit new highs on Tuesday. Are you listening, Ben?